The so-called Taylor Rule states that:
A)monetary policy should only respond to the changes in real GDP and not in inflation.
B)monetary policy should only respond to the changes in inflation and not in real GDP.
C)monetary policy should respond to changes in both real GDP and inflation.
D)Monetary policy should only respond to changes in unemployment rate.

Question

Quizplus · Accepted Answer

The Taylor Rule states that monetary policy should respond to changes in both real GDP and inflation. It suggests that the central bank should adjust interest rates based on the deviations of actual inflation and real GDP from their target levels. The rule helps to guide the central bank's actions and promotes economic stability.

The So-Called Taylor Rule States That